Green Subsidies Threaten Households and Manufacturing

A proposed subsidy for green central heating will lead to a sharp rise in energy bills, threaten the manufacturing recovery and drive companies abroad, consumer watchdogs and business groups say.

The renewable heat incentive, due to be introduced next April, will benefit anyone who installs renewable heating devices such as biomass boilers, solar-thermal water heaters or ground-source heat pumps.

But such equipment is expensive and suitable only for owner-occupiers. However, the bills of all energy consumers will go up to pay for the subsidy.

Businesses and consumer groups are concerned that interventions in the energy market are forcing up bills.

These include the carbon reduction commitment, which affects 5,000 businesses, and feed-in tariffs, which save £986 a year in households that produce their own renewable electricity.

Even the Department of Energy and Climate Change says that none of the carbon savings expected under the heating incentive scheme would be cost-effective and that, at best, it would be unnecessarily expensive.

The initiative is expected to cost consumers twice as much as the existing mechanism for subsidising renewable energy, lifting domestic bills by between 9 and 21 per cent and industrial bills by 12 to 35 per cent.

Large energy users, such as chemicals and plastics companies, could have to pay up to 70 per cent more, experts say.

Jeremy Nicholson, director of the Energy Intensive Users Group, which represents companies including Corus and Ineos, said that the Department of Energy and Climate Change had no interest in the welfare of the energy consumer.

“They are absolutely intent on rendering our energy prices uncompetitive for industry and far too high domestically, with huge implications for fuel poverty.

“The last Government was not listening and has proposed measure after measure of little cost-effectiveness and with scant regard to the economic consequences.

“We have had a multiplicity of intervention in the market. There is the emissions trading scheme, the renewables obligation, the carbon reduction commitment, the climate change levy, the proposed carbon capture and storage levy, plus feed-in tariffs and renewable heat incentives.

“The cost to business is pretty horrendous and is eroding UK manufacturing competitiveness.”

The Energy Intensive Users Group and the EEF, which represents manufacturers, have described the proposals as flawed and have called for “common sense to prevail”.

Neil Bentley, of the CBI, said that any scheme “must be affordable and cost-effective, and must not harm the competitiveness of British industry”.

Ron Campbell, of National Energy Action, a charity that aims to wipe out fuel poverty, said: “We are concerned that the Government’s targets to end fuel poverty by 2016 are becoming increasingly unattainable in a world of high fuel costs and additional levies on consumer bills.”